USD/JPY Daily Outlook- June 23, 2014

The USD/JPY pair tried to rally during the session on Friday, but as you can see it really didn’t gain any significant traction. The market seems to be essentially stuck in this general vicinity, as the 102 level seems to be essentially “fair value.” After all, it is in the center of the range that we have been bouncing around in, with the 101 level on the bottom and the 103 level on the top. The markets seem to be waiting for some type of information, and that being the case I think that you’re going to have to follow what happens with the Federal Reserve. After all, the Federal Reserve tapering off of quantitative easing is a positive thing, but we need to see whether or not there are going to do with any significance. They just announced that they are going to taper off of quantitative easing by $10 billion per month starting in July.

2 sides of the equation.

Remember that the Bank of Japan also has a significant effect on the pair as well, especially considering that they are in such a loose monetary policy position. The Bank of Japan continues to try and devalue of the Yen, and if the Federal Reserve continues to tighten, we should see a bit of a “one-way trade.” The market tends to follow the bond yields in the 10 year notes, as far as interest rates are concerned. That being the case, if the interest rates in the United States continue to rise, this should eventually pushes pair higher. It really hasn’t worked out that way yet, but sooner or later the market should normalize and that should send money flowing from Japan into the United States.

Between now and then, I suspect that we are simply going to go back and forth. However, if we can finally get above the 103 level, that would be a massively bullish move, and should send this market looking for the 105 level, if not higher than that given enough time. Selling isn’t something that I necessarily interested and at this moment.